High household debt and US tariffs hinder Thailand's economic growth

Thailand's economy is already on the ropes. Consumption has remained tepid despite a government stimulus programme, few of its economic engines are firing, and uncertainty wrought by US President Donald Trump's reciprocal tariffs means that the Thai economy could grow just over 1 per cent this year.

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Now, Southeast Asia’s second-largest economy faces a fresh challenge: a new round of political chaos that can bring down Prime Minister Paetongtarn Shinawatra or her ruling Pheu Thai party.

“We are currently in a period of economic downturn, with many issues affecting us,” Visit Limlurcha, vice chairman of the Thai Chamber of Commerce, told Reuters.

“This could make things even more complicated.” The most significant short-term concern is the passage of a 3.78 trillion baht ($115 billion) budget for the 2026 fiscal year, which starts on October 1, that must pass through parliament over the next few months. That process could get stalled if Paetongtarn, who is under siege for her handling of a festering border row with neighbouring Cambodia, dissolves parliament and triggers fresh elections.

“If parliament is dissolved before the budget is passed, the process will be delayed significantly,” said Prakit Siriwattanaket, managing director of Merchant Partners Asset Management. Finance Minister Pichai Chunhavajira told reporters on Friday that he was optimistic the budget would be approved by parliament by October.